What You Should Know

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A bond broker is someone who is licensed or registered to buy and sell bonds for institutional or individual investors. Brokers and firms are usually regulated by national financial market regulators. Brokers may work within bond and share firms or they may work as independent brokers. Different types of brokers offer different levels of service and varying access to bonds. You may find brokers who also deal in shares, and they may be with banks, brokerage firms, or independent.

“Full-service” brokers offer clients a wide range of services including: helping clients develop investment goals, researching and recommending investment opportunities for individual clients, as well as executing purchases and sales of bonds for a client’s portfolio. Another difference between full service brokers and other types of brokers is that full service brokerage firms maintain an inventory of various bonds to offer directly to clients.

Discount brokers or execution only brokers execute buy and sell orders for clients, but they generally do not provide advice on investments and they often do not hold a large inventory of bonds. Instead they purchase bonds from full-service brokers or bond issuers and then resell them to individual investors (with some charge for their services).

Online brokerage companies and “supermarkets” offer full and discount services for investors who would rather invest directly through the internet. Online brokerage firms may enable you to compare bond inventories across multiple dealers, research bond types, and place orders online. Not all online brokerage firms offer bonds and not all online firms offer you the ability to compare across dealers. You purchase and sell bonds by opening an online account. Rules differ in different countries as to what types of bonds can be invested in online, so consult your country’s financial market regulator.

Third party brokers do not carry an inventory of bonds. Rather they bid for bonds for individual investors from a wide variety of dealers. Think of third party brokers as “bond headhunters.”

Many banks also offer customers the ability to invest in bonds through on-staff registered representatives. 

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